Committees

The Financial Sustainability of Local Authorities inquiry

Inquiry

Local authorities in England have maintained their overall capital spending levels, according to the National Audit Office (NAO), but face pressure to meet debt servicing costs and to maintain investment levels in their existing asset bases.

Local authorities' revenue spending power—including government grant and council tax—fell by 25.2% in real terms from 2010–11 to 2015–16. By contrast, the NAO estimates that capital grants to authorities increased by 0.2% from 2010–11 to 2014–15, although this does not include education.

Capital spending by authorities increased by 5.3% in real terms overall between 2010–11 and 2014–15, but this is uneven across local authorities and service areas. Almost half (49%) of authorities reduced their capital spending. Most service areas saw an increase in capital spend with the exception of culture and leisure: capital spending fell by 22% overall in this area, including reductions in spend of 33% on open spaces and 60% on libraries.

National Audit Office report

The National Audit Office have found that authorities face a growing challenge to continue long-term investment in their existing assets. Total spending has remained stable, but increasingly capital activities are focused on 'invest to save' and growth schemes that cover their costs or have potential to deliver a revenue return.

Many areas of authorities' asset management programmes do not meet these criteria and are now seen as a lower priority.

According to the NAO, local authorities' debt servicing costs have grown as a proportion of revenue spending as their revenue resources have fallen. A quarter of single-tier and county councils now spend the equivalent of 9.9% or more of their revenue expenditure on debt servicing, with metropolitan district councils being particularly exposed.

Work news

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Public Accounts Committee report warns of risks to local authority finances from commercial activities
18 November 2016
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Financial sustainability in local authorities examined
Public Accounts Committee examines pressures on local authorities to maintain investment and service debt
10 October 2016
Total results 2 (page 1 of 1)

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